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The Self-Rehypothecation of Ben Bernanke

 by James Howard Kunstler

     How then did Ben Bernanke finally summon the fortitude to entertain tapering Federal Reserve bond purchases from $85 billion a month to, say, $84.7 billion a month come September 18th, the world may never know, but now the deed appears to be done, in his absence, by remote paranormal transmission, while the other Fed board members, with their attendant economist factotums, servelings, and catamites all beamed the message out of horsey Jackson Hole that they expected — even pined for — the vaunted return to “a normal economy.” Which left many bystanders wondering if that meant a Dow Jones industrial average at, say 3,847 around Columbus Day, the 10-year bond at 5 percent, and every pension fund in world bleeding out from a sucking chest wound — not to mention a Hindenberg-like conflagration of the US Treasury as debt payments went beyond critical.

     Pardon me for saying that I don’t think these mooks of finance know what they’ve been paying for with the QE series of monkeyshines. They’ve been creating “money” for five years to offset the collapse of a no-longer-cheap-oil economy. It’s really that simple. If any of these poobahs thinks they can run a “normal economy” at $106-a-barrel then they should run out and get a realtor’s license and buy as many Arizona REO’s as the foundering banks will admit to holding on their books, and then become landlord to renters working 29 hours a week on the WalMart loading dock.

     Actually, I don’t think they will have to wait that long to see the consequences of their loose, silly talk. America’s major export is now working its hoodoo in many other parts of the world as currencies become unglued and economies look down at the flimsy bamboo scaffolding that holds them up so high. America’s major export these days is economic uncertainty, specifically the question of what, exactly, will maintain the pretense that the hopelessly intertwined financial affairs of China, India, Brazil, Japan, Euroland, Russia, and everybody else, really, including ourselves, are not unraveling like some kind of cosmic sweater knitted with one needle by a cross-eyed god with the jim-jams.

     A lot of people begin to suspect that there is something called “an economy” quite apart from the shenanigans and dumb shows put on by the banks and their imitators, the hedge funds. That actual economy is a very earthy thing, in so far as it is pegged to the biophysical realities of the planet — such as, can you harvest a turnip and therefore make turnip soup for dinner? After all, you won’t be making a soup out of interest rate swaps. Of course, dining on turnip soup is not as sexy as driving to work in a Tesla to a hedge fund boiler room where you get to cream off millions every week by playing Where’s Waldo with the rehypothecated accounts of the muppets who foolishly entrusted you with their own ill-gotten savings.

     The nervousness out there is palpable and epochal. Not only is everyone waiting for some other shoe to drop after Labor Day; they’re waiting for it to drop on their own heads. The most visible result, I think, will be a shocking flight into precious metals, of which there is precious little to meet the kind of demand soon to overwhelm that teeny-weeny market corner of the financial universe. What else is there now? The Fed taper talk is pretty much a case of holding a gun to a puppy’s head — the puppy being the equities markets. The bond sector is a hall of mirrors. Cash is a lot less than king in several countries now, with the contagion running hot. Everything is mispriced to the upside except Gold and Silver, which are mispriced the other way, especially after the chicaneries of April and June when, depending on which story you believe, the banks ran a naked short campaign to knock the stuffing out of the metals so they could then go back in and hoover some of it up cheap in an attempt to conceal the multiple out-leasings (that is sale, or perhaps theft) of metal left by fools in their custodial charge. Or, some other sages might say, the knock-down was done to defend the honor of the evaporating US dollar (a dollar with the vapors), making it appear sturdier than it actually is. Yes, well that worked, sort of, for a few months, while Wall Street repaired to the annual East Hampton endorphin splash. I was not invited to Diddy’s party, where the pineal glands of the gathered .01 percent were audibly ringing with celestial euphoria as they swapped the reassuring pulsations of their own specialness. Those people, you can be sure, were not pining for a “normal economy.”

     Long story short: we’re in for some interesting weeks ahead. Keep your hat on.

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About James Howard Kunstler

View all posts by James Howard Kunstler
James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation. His novels include World Made By Hand, The Witch of Hebron, Maggie Darling — A Modern Romance, The Halloween Ball, an Embarrassment of Riches, and many others. He has published three novellas with Water Street Press: Manhattan Gothic, A Christmas Orphan, and The Flight of Mehetabel.

370 Responses to “The Self-Rehypothecation of Ben Bernanke” Subscribe

  1. progress4what September 1, 2013 at 9:51 am #

    I suspect there’s plenty of ammo in these United States to go around.
    The problem, of course, is that it’s hard to buy more.

    When I go to the local Wal-Mart (which is about the only general merchandise game-in-town within 20 miles of my house) I always ease my way through sporting goods. They are now having AR-15′s stay in stock almost continuously, at $1200/copy. But I haven’t seen a box of .223, there, since right after the Newtown shooting. I’m not sure what meaning this has – but it does have some.

    Way more than once – I have found that standing in front of the ammo case at Wal-Mart is as good as standing around the proverbial water cooler -for hearing things.

    So, I’m standing there Thursday afternoon, gazing at overpriced, oddball ammo in sizes that won’t fit any of my weapons, when another guy sidles up.

    “I don’t know when we’ll ever see a 500 round box of ,22 hollow point again,” I say to him and the glass.

    “On-line,” he says
    And that’s all he says.
    And we both go our separate ways. But this has meaning.

  2. progress4what September 1, 2013 at 9:57 am #

    Speaking of resilience, or independence, or survival, or something.

    Here’s part of a Facebook post from the Sheriff in the county right over the ridge from mine:

    “Remarking on “worrisome times,” Sheriff Stacy Nicholson of Georgia’s Gilmer County wrote on Facebook earlier this year that “I, along with a large number (which is growing daily) of Sheriffs across the state of Georgia as well as the entire United States, have no intention of following any orders of the federal government to perform any act which would be considered to be unlawful or a VIOLATION OF ANY PART OF THE CONSTITUTION OF THE UNITED STATES OR THE CONSTITUTION OF THE STATE OF GEORGIA, nor will we permit it to be done if within our power to prevent it.””
    http://www.csmonitor.com/USA/2013/0831/Mississippi-indictment-highlights-pitfalls-of-power-for-sheriffs

    Interesting times?
    We’ll see.

    • BackRowHeckler September 1, 2013 at 10:28 am #

      Hey P2C, along those same lines … last week Obama issues an Executive Order banning re importation of Military Rifles which had been given to allied foreign governments in past conflicts. Almost immediately Senator Dick Blumenthal D CT hailed it as some great move that will ‘save lives’. Most of these guns were old Springfield 03s, Krags, and Garands, good shooters but collectors items, guns never used in crimes. What’s going to happen now is that the Civilian Marksmanship Program, which dates back to President Teddy Roosevelt, will have to be cancelled, because these were the type of guns the program relied on.

      –BRH

      • CHenry September 2, 2013 at 10:11 am #

        I thought the Civilian Marksmanship Program pretty much relied on .22LR for obvious reasons of economy. I have seen some resold government model (no-frills, cheap wood) Coopers online.

        The Civilian Marksmanship Program is a quaint memory anymore. I had the benefit of it growing up in Western Pennsylvania when firearms training was pretty much just that and airsoft and computer gaming weren’t competing.

        Most of the old bulk resold military rifles lately have been ancient Mosin Nagants with metric calibers, not M1 Garands.

        • Trean September 3, 2013 at 5:15 pm #

          It’s now the Appleseed project.

    • Karah September 1, 2013 at 7:55 pm #

      It would be more interesting if the Sheriff could apply his statement to something going on right now. What is the Federal Government asking him or could ask him and others to do that would be in conflict with the Constitutions. What exactly is their scope of “power”? They aren’t a legislative body, they just enforce laws. So, in essence, he is stating he would not enforce certain orders from the Fed or his State Government. He is stating he works for “the people” of Georgia first and “the people” of the United States second.

      How does he feel about immigration laws and asking certain people for proof of citizenship?

      How does GA deal with concealed weapons?

      Should a Sheriff use Facebook to speak in an official capacity?
      Or
      should Sheriffs only use specific official channels of communication with the public advisable by the District Attorney’s Office?

      Are there National Associations for Sheriffs as well as for Mayors?

  3. progress4what September 1, 2013 at 10:27 am #

    Wow. I just tried to find Q’s post where he quoted an email from JHK.
    It’s gone.*

    So – I just deleted the post I was working up.

    Interesting times here at CFN, too.

    *Or maybe I just couldn’t find it because of the way these comments are now paginated. Is that by design, to curtail conversations here?

    Take care, folks.
    I’m going outside.

  4. BackRowHeckler September 1, 2013 at 10:42 am #

    2 more people shot to death on the streets of Hartford this week, not with WW1 Springfields, but with stolen handguns. There is some kind of drug turf war going on down there, and the bodies are piling up. The main currency that funds the war is the value of Food stamps, now called SNAP cards. Our state cities have a program that gives all kids 18 and under free breakfast, lunch and dinner, 365 days per year. Parents in Hartford do not have feed their own children. The Govt. does it for them. So food stamp value is excessive wealth, to be use on such commodities as Heroine, Crack Cocaine, Marijuana and illegal handguns, and sneakers (which people have been killed over).

    BRH

    • beantownbill. September 1, 2013 at 1:44 pm #

      Makes sense to me. Crack, heroin and weed make for great barter items in bad times. And who doesn’t have a need for a handgun on the mean streets? In this current era, federal reserve notes are no longer the only currency game in town. Is this a preview of the future?

  5. beantownbill. September 1, 2013 at 1:49 pm #

    BTW, no one has commented on the recent absence of Carol, Janet, et al. Procon, I would have thought you, at least, would ecstatically note this. Perhaps they are on vacation during the Labor Day season. After all, everyone needs a paid vacation from time to time. Will they (it) come back after the weekend ready to go with a renewed vigor?

    • BackRowHeckler September 1, 2013 at 4:57 pm #

      I miss ‘em, Bill.

      • ZrCrypDiK September 2, 2013 at 2:19 am #

        GOOD RIDDANCE!!! (Let’s be *totally* honest)

    • Karah September 1, 2013 at 8:25 pm #

      It’s one thing to be intelligent, it’s another thing to be intelligent and disturbing. I have to say it’s a bit disturbing to read most of the comments; however intelligently delivered, between the two. It got too personal for one thing. Having 300 plus posts a week by only a few individuals is simply ridiculous. They seem to forget this place is about JHK and his writings and opinions and NOT theirs or ours. Sure, we can explain our stand but it doesn’t take 300 posts every week; spells “obsession” and a lack of self control.

      Also, I think it’s bad form for posters to promote their blogs on someone elses blog without the initial bloggers consent. To me, that is as annoying as posting “first!”. All this stuff reflects the tendency of all INTERNET communications to become a competition for attention instead of a public progressive conversation. If you comment, you acknowledge you’re on someone elses public property or doorstep and should conduct yourself accordingly. This is not a place to paste links in order to divert the conversation elsewhere. A simple citation is sufficient.

      I still believe most publications are meant for reading and not public comment. People need time to digest and ruminate on ideas to which they might not have previously been exposed. Obviously, if one disagrees with something written, they should discard it or write a letter to the editor. It’s up to the editor to include those negative comments or criticisms in the original publication. Comment sections create a lot more work for the blogger. So they have the option to leave it out.

      Really, most people only care about or give serious attention to what a handful of people (professional peers, sponsors and wealthy patrons) have to say about their work. I fall into neither of those categories.

  6. ZrCrypDiK September 1, 2013 at 10:26 pm #

    Come up *SCREAMING*!!! Oh, poor ol’ St Claire bit his *NUTZ*…I’m too tired for this *SH!* Sunday PM (15 in an hour?).

    • ZrCrypDiK September 1, 2013 at 10:45 pm #

      Your (i’m) banned for sure. Why? How could you do that to all *surrounding*. (DO YOU UNDERSTAND ME)… Sad and *SICK* facts R just that – we can’t really turn back the *HANDS OF TIME*…I’ll leave you all with the following (since I’m *BANNED*)


      The video cannot be shown at the moment. Please try again later.

      • ZrCrypDiK September 13, 2013 at 6:35 am #

        OMG you din’t *DELETE*?!~? Hehe, nice *CONCERT*.

      • ZrCrypDiK September 19, 2013 at 3:24 am #

        In *STEELTWN*…

      • ZrCrypDiK September 19, 2013 at 8:27 am #

        OMG you deleted it all but *THIS*!!! nice *concert*!!!

        • ZrCrypDiK September 20, 2013 at 4:03 am #

          OMG – *LOST PASSWORD* – killer!!!

      • ZrCrypDiK October 8, 2013 at 1:18 pm #

        Hah! the *PENULTIMATE* placeholder?!… Last weeks blog got a 2nd re-read – best *EVAH*!!!

  7. CHenry September 2, 2013 at 8:20 am #

    What else is there? Farmland. Les vaches. Les oeufs.

    • ZrCrypDiK September 2, 2013 at 10:21 am #

      Hahaha Cows and eggs – Comment dit *PIGS* en francais…

  8. progress4what September 2, 2013 at 4:02 pm #

    “BTW, no one has commented on the recent absence of Carol, Janet, et al. Procon, I would have thought you, at least, would ecstatically note this.” – beantownbill -

    I would have, Bill, but I received an email from JHK specifically asking that no further reference be made to the primary CFN Troll.

    JHK even mentioned this poster by name – using the handle that that poster used to identify himself for over three years on CFN.

    So, I’ve assumed that poster has been permanently banned,by some mechanism.

    As to what will happen if that poster resumes Trolling under a new handle and (presumably) a new email login – that remains to be seen.

    Also uncertain is the relationship (if any) between JHK and the aforementioned poster. Very interesting, eh?

  9. progress4what September 2, 2013 at 4:29 pm #

    “Having 300 plus posts a week by only a few individuals is simply ridiculous. They seem to forget this place is about JHK and his writings and opinions and NOT theirs or ours.” – “karah” -

    That’s hard to argue with, especially if the primary thrust of those 300 posts is to negate or belittle JHK’s body of work – and those who happen to enjoy it or agree with it.

    I’ll disagree with you about comment threads, personally I find reading them very rewarding – adding understanding about how different minds engage with the same story in different ways.

    And I’ll also disagree with you when you say,”most people only care about or give serious attention to what a handful of people (professional peers, sponsors and wealthy patrons) have to say about their work.” This may be true for research writers or academics, but somehow I suspect that writers for popular culture need to consider how their real readers feel.

    ========================

    In his email to me, JHK also said not to “quarrel.”

    I’m still not sure how to stay off of that slope.

    • Karah September 3, 2013 at 11:46 pm #

      Peak Oil wasn’t popular when JHK started writing about it.

      Peak Oil is currently unpopular and will continue to be unpopular.

      Peak Oil and all the ramifications outlined by JHK and obviously apparent in the world (including Main St. U.S.A.) is very unpopular.

      The “real people” consensus continues to be that America will continue finding progressive ways to survive on recycled peanut oil and beer cans while the rest of the world implodes on themselves.

      What are “real readers” anyway? Is that like “real fans”?
      Do we have to be “fans” about intellectual bodies of work?
      JHK is not proposing a system of beliefs, he’s publishing news outside the mainstream media like the social conscious, clear headed, articulate and humorous journalist he is!

  10. progress4what September 2, 2013 at 4:36 pm #

    And I don’t see the problem with links to people’s personal blogs, as long as they are somewhat “peak” related.

    =======================

    And my post about sheriffs was intended to pose the idea that the sheriff-based system of law enforcement might (in some areas) arrest the slide into total anarchy that some feel inevitable in the case of TEOTWAWKI.

    And the sheriff I referenced is probably most concerned about 2nd amendment issues – at least for now and in public.

  11. WW September 8, 2013 at 1:57 pm #

    In reply to Janos. You are very wrong. Chemical weapons can be devestatingly effective. The Marsh Arabs as well as thousands of Iranian troops could testify ,they were alive that is.
    Out of all the Iranian casualities in the Iran Iraq some 5 to 8 per cent were caused by the use of gas!
    In WW2 the Germans despite having developed nerve agents, mainly by IG Farben, never used them because German intelligence wrongly believed that the British had also developed them. They feared the retaliation, with good reason. In 1943 the USS John Harvey was bombed whilst in the Italian port of Bari. It was loaded with mustard gas ready for use in retaliation should the germans use theirs. There were thousands of casualties with out even allowing for the Italian civilians who were never officially counted.
    By Goerings own admission they did not use the stocks they had on the Atlantic wall on DDay because and only because the German army relied heavily on horse transport. Despite their best efforts they had been unable to develop a gas mask for horses that allowed sufficent air through for the horse to work whilst wearing it.
    Hundreds of tons of Gas Blau were found around the supply areas of the Atlantic wall along with the equipment to deploy it.
    The Germans did deploy gas at the battle of Kerch in the Crimea. There were thousands of dead .

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